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President Barack Obama says Congress has to raise the debt ceiling because they already spent the money. Militants on both sides see where Obama could go with this, even as the president and all of his aides deny any intent to play games with the debt ceiling.

Some of his friends urge—and many of his antagonists fear—that the president could order the Treasury to borrow money in excess of the debt ceiling, contending that Congress implicitly authorized the deficit spending in the appropriations it enacted in excess of revenues.

Such an interpretation would make the debt-ceiling law a dead letter. Perhaps it should be that, but it's not for the president to make it one. Congress has the constitutional power to borrow money on the credit of the United States and the responsibility to pay its debts. The Treasury cannot borrow—legitimately, anyway—without explicit congressional authorization.

Until 1917, Congress authorized each issuance of debt in a separate law. Conducting two world wars on the cuff made that impractical, so Congress gave general approval, always up to some limit. Ever since 1946, Congress has just picked a number at random, always lots bigger than the previous one, and voted on it reluctantly, as it gives the party out of power an opportunity to complain about the profligacy of the party in power.

Reckless Fiscal Policies

As one junior Democratic senator said in 2006, "The fact that we are here today to debate raising America's debt limit is a sign of leadership failure. It is a sign that the U.S. government can't pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our government's reckless fiscal policies."

The senator, Barack Obama of Illinois, went on to complain that President George W. Bush and the Republican Congress had lowered taxes without making offsetting spending cuts, and he concluded, "Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better. I therefore intend to oppose the effort to increase America's debt limit."

Republican Senator Charles Grassley of Iowa retorted, "We cannot as a Congress pass spending bills and tax bills, and then refuse to pay our bills. Refusing to raise the debt limit is like refusing to pay your credit-card bill—after you've used your credit card. The time to control the deficits and debt is when we are voting on the spending bills and the tax bills that create it."

The debate in 2006 was a political mirror image of the one taking place now, but then as now, the debate was devoid of significance. As Obama would admit in 2011, "That was just an example of a new senator making what is a political vote as opposed to doing what was important for the country."

As much as the country needs spending cuts and tax reform, every reasonable person agrees with today's Obama and the Grassley of 2006 that Congress should vote an increase in the debt ceiling, with or without provisions for cutting spending. Even the people striking an unreasonable pose, such as the Obama of 2006 and some Republican congressmen today, do not believe that their speeches will cause an actual default on the public debt.

Nor do we; nor should anyone.

Alternative Disasters

Although the Treasury says it cannot juggle the books beyond the middle of March without borrowing as-yet-unauthorized sums, there should be no presumption that default is a necessary consequence of Congress's failing to act. The U.S. government has another option. It can stop enough spending to avoid the need to borrow more—until its elected officials can grow up and set new policies.

If paying interest on the national debt comes first among the nation's spending priorities, that expense is expected to be a mere $359 billion for the current fiscal year, out of projected federal revenue of about $2.5 trillion. On an annual basis, that leaves $2.1 trillion of revenue to spend before the U.S. has to borrow anything.

But the government has been spending—and hopes to keep on spending—at an annual rate of $3.5 trillion, before interest expense.

Thus the temporary solution to the debt ceiling is simple, though drastic: To avoid default on Treasury debt carrying the full faith and credit of the United States, the Treasury must dock 40% from every check it writes, probably issuing scrip as a promise to pay the balance eventually.

Once again, to our sorrow, "Wherever the nation is going, California will get there first." California issued scrip during self-created budget crises in 1992 and 2009, and eventually paid its obligations in full.

The 40% haircut would provide a temporary (we hope) pay cut for all government employees, including the military; a temporary (we hope) reduction of all kinds of benefits, including Social Security; and a temporary (we hope) refusal to pay full amount of the sums the government owes for goods, services, and tax refunds.

Alternatively, the government could make some payments entirely in scrip and others entirely in money. The resulting food fight might open some minds in Washington.

As bad as it sounds, issuing scrip is not as bad as defaulting on U.S. Treasury debt.

The Truth About Money

It could be instructive: The people might learn that it's all funny money. As the old song says, "We don't give a damn about the greenback dollar, spend it fast as we can."

Federal paper money, backed only by the ability of the government to print more, first was authorized by Congress in 1862 on the modern-sounding excuse that it was "a war measure, a measure of necessity and not of choice." The sponsor said, "These are extraordinary times, and extraordinary measures must be resorted to in order to save our Government."

However much the paper dollar may have been justified in the middle of war, the use of legal-tender greenbacks continued through 14 years of peace, until 1879, when the Treasury made them convertible into gold on demand. The U.S. had one stable currency.